USD/CAD - Canadian Dollar Sinks Despite Oil Price Surge

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USD/CAD Open: 1.2154-58, Overnight Range: 1.2148-1.2167, Previous Close: 1.2159

WTI Oil is at $71.50 and gold is at $1,851.10. US markets are mixed today.

For today, USD resistance is at 1.2185. Support is at 1.2123.

- WTI oil prices add to Friday’s gains
- FX Focus shifts to FOMC meeting Wednesday
- US dollar opens with gains, in holiday thinned trading

The Canadian dollar sank, alongside the other G-10 major currency pairs, in a somewhat quiet overnight session. Holidays in Australia, China, and Taiwan, combined with an empty economic data calendar and the looming FOMC meeting, put a damper on trading activity.

Canadian dollar traders ignored a surge in crude oil prices. West Texas Intermediate, the North American benchmark, climbed from $68.53/barrel on June 8 to $71.67 in Europe today, a gain of 4.6%. Oil prices got a bit of a boost following the G-7 statement, which promised to spend money on a new infrastructure plan called “Build Back Better” to counter China’s Belt and Road initiative and offset China’s influence in global affairs.

European equity indexes are at new record highs, as are S&P 500 futures, in part because US Treasury yields are hovering just above recent lows. The 10-year US Treasury yield is at 1.46% in early NY trading. Gold prices have dropped in response to the rise in the US dollar.

Today’s FX price action may be due to pre-FOMC position adjusting because of concerns that the FOMC statement may be more hawkish than expected. There is a lot of chatter that the Fed may react to the recent rise in inflation and begin discussions about when to start tapering QE purchases.

Fed speakers have been muzzled since June 4 due to the usual blackout ahead of a meeting. Before that, most policymakers favoured a wait and see approach, as the recent data did not meet Powell’s criteria of “substantial further progress.”

EURUSD traded narrowly in Asia then dropped to 1.2095 from 1.2120 in Europe. The move was reversed, and EURUSD is trading at 1.2120 in early NY trading. Eurozone Industrial production rose 0.8% m/m in April compared to a 0.4% rise in March. Analysts consider the gain to be “an impressive performance” as it occurred in the face of bottlenecks and supply chain disruptions.” EURUSD remains rangebound in a 1.2050-1.2180 band.

GBPUSD dropped to 1.4071 from 1.4117 due to broad US dollar strength. The ongoing EU/UK spat over Britain’s unilateral changes to the Brexit agreement on the Irish Border Protocol weighs on prices, on fears the EU may retaliate with sanctions.

Canada Manufacturing Sales are due today, but the results should not impact the Canadian dollar.

Today’s Suggested Range USD/CAD: 1.2100 – 1.2200
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